DAILY NATION Wednesday June 10, 2015 FOOTBALL Argentina bank on Messi magic to win Copa America as Neymar leads from the front in Brazil’s campaign. P.59 SPORT INSIDE ESTIMATES | Taxpayers are expected to fund 65 per cent of the budget Rotich to unveil Sh2trn Budget SCHOOL GAMES SHIMBA HILLS STUN OBAMBO IN NETBALL Coast girls floor defending champions in opening match at Nyeri Complex grounds. P.57 Minister expected to announce tomorrow measures the National Treasury will take to fund expenditure BY WACHIRA KANG’ARU wkangaru@ke.nationmedia.com trillion expenditure outlay for the next financial year. In his Budget speech, Mr Rotich N Download the NMG PLAY app on Google Play and scan this QR code with your smart phone for pictures, videos and more stories. will be expected to announce measures the government will take to raise revenue to fund the expenditure. In its second Budget since assum- ing office, the Jubilee government will also be expected to explain how it will revive the ailing economy as it deals with insecurity, the weakening shilling and the rising cost of living. A survey by audit and finance firm KPMG shows that the three are keeping most of the chief executives in the country awake. “The key challenges identified by business leaders as affecting businesses in Kenya in the short run are rising insecurity, depreciating shilling and increased inflation. These have the joint effect of increasing the cost of production while also leading to the loss of revenue for businesses in Kenya,” says the KPMG report. Taxpayers are expected to fund 65 per cent of the Budget with tax FILE | NATION National Treasury Cabinet Secretary Henry Rotich addresses journalists during the Capital Markets Open Day in Nairobi on May 7. With him is Capital Markets Authority acting Chief Executive Officer Paul Muthaura. revenue for 2015/2016 set at Sh1.3 trillion. The balance of Sh800 billion will be funded through borrowing and donor cash. Estimates approved by Parliament last week show that the national government, the Judiciary and Parliament will be allocated Sh1.8 trillion, with Sh399 billion going to development budgets. Country governments were allocated Sh259.7 billion. Mr Rotich will face a tricky balanc- ing act. He has to deal with the need to increase taxes to help the Kenya Revenue Authority (KRA) meet the ambitious Sh1.3 trillion target and the need to revive an economy already in a slowdown mode. Last year, the economy slowed down to 5.3 per cent, from 5.7 per cent in 2013, the effect of which has been transmitted to low tax collection, with KRA failing to meet its revenue target. By March this year, KRA had missed the target by eight per cent, having collected Sh761.4 billion against a target of Sh829.3 billion. Announcing a flat tax budget last year, Mr Rotich hoped increased economic activity in the country would aid KRA to meet a target of Sh1.1 billion. The slowdown means the target will be missed. Three key sectors — agriculture, manufacturing and tourism — recorded a slump. None of them have shown any sign of growth this year, ational Treasury Cabinet Secretary Henry Rotich will tomorrow unveil the Sh2.1 despite the government hoping the economic growth would accelerate to 7 per cent in 2015/2016, supported by a conducive business climate and investment in energy, transport and agriculture. That conducive business environ- ment is already at risk due to the actions of county governments. Strained of revenue to fund their budgets, the regional governments have resorted to taxing almost every aspect of human, social and economic activity at their reach, a factor also captured by the KPMG survey. Sh259bn The amount county governments were allocated in estimates approved Parliament last week “In a bid to increase their revenue and entrench their power, county governments have introduced various levies on businesses within their jurisdiction. This has, in turn, led to an increase in the cost of doing business in the country as companies have to bear both national taxes and increased county government levies and taxes,” says the KPMG report Yesterday’s decision by the Central Bank of Kenya to raise the benchmark rate from 8.5 per cent to 10 per cent as defence to a wobbling shilling also complicates the matter for the Treasury. It means banks will be forced to increase the lending rate, pushing credit to the productive sectors of the economy out of reach.